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Stocks are traded on exchanges which are either physical locations or virtual exchanges. These exchanges or stock markets as they're known in popular parlance, allow buyers and sellers to trade stocks as and when they wish to do so. There are two types of stock markets - the primary market and the secondary market. In the primary market, only new issues or public offerings are trades, while, in the secondary market, stocks already launched in the market change hands between sellers and buyers. Some of the best known and admired stock markets in the world are the New York Stock Exchange (NYSE), the NASDAQ, the Nikkei (Japan), the London Stock Exchange, etc. If you are a newcomer to the investing process and the hoopla which accompanies the rise and fall of stock markets, read through some simple guidelines on how to read and understand the movements of stocks, mentioned below.

These guidelines should be able to help you understand when and why you should either buy or sell. If you want advanced help - a system that can make you money in the stock market EVEN in a recession - check out the Trading Pro System. I was impressed.

Step 1:

Factors affecting the price of a stock. Stock prices are directly affected by the position and performance of the issuing companies, it is not the total value of the stock issued that counts, but the price of the stock multiplied by the number of outstanding shares or what is also called market capitalization. Current and continued performance, scope for future growth and expansion also play a vital role in discerning the value of a company's stock and thereby its price. Companies are required to report their earnings every quarter and you will most likely find price fluctuations around the time these results are due. Higher than expected earnings will cause the price to jump, whereas a poor performance will cause the price to go down.

Step 2:

Reading a stock table/quote. General trends in the stock market are always carefully analyzed and reported in great detail. There is no dearth of the number of reports and business articles which you will find - both online and in real time - on how the stock market is currently behaving. However, most of these are opinions of the writers or analysts and there may be several differing opinions out there. If you want to understand and analyze the market yourself, you need to be able to know how to read the figures published on stocks. In a typical stock table or quote, you will find the following information which will give you a current idea of the performance of the stock. This changes on a day-to-day basis and even intra-day given the volume of trade done during the day on that stock.

  • 52 Week high and low: The highest and lowest price during the last 52 weeks as on date of reporting.
  • Company name and type of stock: Special symbols after the name of the company will specify that it is preferred stock. If there are no symbols, then it means the stock is common stock.
  • Ticker symbol: A four-alphabet abbreviation to identify the company.
  • Dividend per share and dividend yield: If these two columns are filled, then it means that the company is issuing dividends. The dividend yield column will tell you the return on the dividend; this is calculated as the number of annual dividends per share divided by the price per share.
  • Price/earnings (P/E) ratio: calculated by dividing the latest stock price by the earnings per share from the last four quarters.
  • Trading volume: refers to the total number of selling and buying transactions for that day.
  • Day high and low: Highest and lowest intra-day prices for a particular day.
  • Close: This is the last price of the stock at the close of day's trading on the market.
  • Net change: will give you the dollar value of change in the stock price over the previous day's price. This can be positive or negative depending on the stock movement and trading for the day.
Step 3:

Bulls and bears. These are terms most of us, including non-investors are familiar with. A bull market is when stock prices are continuously rising because of healthy economic indicators. A bear market is when the reverse is true. During a bullish phase, there is a lot of buying, while investors tend to dispose stock during a bearish phase. However, it is possible to make money during a bear market by short selling - selling a security not owned by the seller in anticipation of the price falling further or simply, sell high and buy low.

If you are a novice investor, it may take some time before you are accurately able to read and anticipate market swings. In such a case, it makes sense to have a balance between ‘safe' and ‘risky' investing. Studying the stock market over a period of time will provide you with a better understanding and make you a savvier investor.
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Garrett has recently discovered the joy of grilling chicken like a confident, pro griller, and wants to share the article with all you readers out there.
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